Global rating agency Moody's on Thursday placed India on a possible upgrade on foreign currency debt and painted a rosy picture for the economy, projecting a seven per cent growth.

At the same time, Moody's affirmed its negative outlook on the Indian government's Ba2 domestic currency rating and the Ba2 ceiling for foreign currency bank deposits after considering the Centre's "dire" fiscal situation.

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Moody's has placed India's Ba1 ceiling for foreign currency debt on review for possible upgrade, "an action that reflects primarily the ongoing improvement in the country's external position", the rating agency said in a statement from New York.

On the GDP projection, it said, "Indian economy is recovering from last year's drought-induced slowdown and real growth is expected to reach 7.0 per cent this year."

It also said the country was gaining ground as a destination for outsource backoffice operations but the volume of foreign direct investment was still low.